Feb. 3 (Bloomberg) -- Canada’s unemployment rate rose to a
nine-month high in January as the trend of sluggish job creation
that began in the second half of last year continued.

The jobless rate rose to 7.6 percent from 7.5 percent as
employment increased 2,300 last month, Statistics Canada said
today in Ottawa. Economists surveyed by Bloomberg News had
forecast unemployment to stay at 7.5 percent and 22,000 jobs to
be added.

Consumers will account for more than half of Canada’s 2
percent economic growth this year, according to the Bank of
Canada, as weak global demand and a high dollar curb exports.
Most of the past year’s job growth came in the first six months
of that period, Statistics Canada said, which suggests consumer
spending growth may be restrained.

“It will weigh against a Bank of Canada rate increase
anytime soon, and suggests the Canadian consumer could continue
to pull back, not just in the face of elevated debts but also
because of weaker job growth,” said Sal Guatieri, a senior
economist at BMO Capital Markets in Toronto.

The Canadian report contrasted with U.S. figures, which
showed payrolls increased by 243,000 in January, bringing the
U.S. jobless rate down to 8.3 percent, its lowest in three
years. Canada’s jobless rate has been below that of the U.S.
since October 2008, and the gap between the two rates is the
narrowest since April 2009.

Dollar Strengthens

The Canadian dollar reached a three-month high today, and
strengthened 0.6 percent to 99.34 cents per U.S. dollar at 2:21
p.m. Toronto time. One Canadian dollar buys $1.0066. It touched
99.28 cents, the strongest since Oct. 31. The yield on the 2-year government bond rose 5 basis points to 1.04 percent.

The challenge facing Canadian manufacturers was highlighted
by Caterpillar’s announcement today that it was closing the
Electro-Motive railway factory in London, Ontario. “The cost
structure of the operation was not sustainable and efforts to
negotiate a new, competitive collective agreement were not
successful,” the Peoria, Illinois-based company said in a
statement.

The Canadian Auto Workers Union said in a statement its 465
members at the plant were left vulnerable by federal foreign
investment legislation that doesn’t penalize companies for job
cuts.

“We sympathize with the workers in London,” Richard
Walker, spokesman for Industry Minister Christian Paradis, wrote
in an e-mailed comment on the closing. “Our government has
taken strong measures to protect Canada’s manufacturing sector”
including tax cuts and the tariff elimination, he said.

Factory Job Losses

Manufacturing employment has fallen by 2.5 percent in the
12 months through January and by 21 percent over the last
decade. Canada’s relatively strong dollar makes the country’s
goods less competitive.

Part-time employment rose by 5,900 in January while full-time jobs decreased by 3,600. Workers classified as employees
rose by 39,200 and self-employed workers decreased by 37,000,
Statistics Canada said. Private-sector employment increased by
19,700 and public-sector jobs rose by 19,600.

Canada’s job gain was led by a 22,800 increase in education
and another 18,800 in information, culture and recreation.

The biggest job decline was 44,800 in professional,
scientific and technical services. Employment in finance,
insurance real estate and leasing declined for a fifth month, by
23,200, bringing the 12-month drop to 49,700.

‘Head Above Water’

“These figures are consistent with an economy fighting to
keep its head above water,” said Toronto-Dominion Bank deputy
chief economist Derek Burleton.

Average hourly earnings of permanent employees rose 2.2
percent in January from a year earlier. The Bank of Canada says
that figure is a key indicator of inflation.

Central-bank Governor Mark Carney kept his benchmark
lending rate at 1 percent Jan. 17, prolonging the longest pause
since the bank began using it as a policy measure in 1994.

“We’re simply not growing fast enough to really be
bringing the unemployment rate down,” said Avery Shenfeld,
chief economist at CIBC World Markets in Toronto. “It might
take a couple of years until we get through the fiscal
tightening around the world that is in part responsible for the
sluggishness.”